Kaye v Norris Ward McKinnon [2015] NZCA 513 (3 November 2015)

Last Updated: 13 November 2015

IN THE COURT OF APPEAL OF NEW ZEALAND
CA333/2015 [2015] NZCA 513
BETWEEN	ANTHONY PRATT KAYE AND MORVA KAYE Appellants
AND	NORRIS WARD MCKINNON Respondents

Counsel:	Appellants in person R Latton for Respondents
Judgment: (On the papers)	3 November 2015 at 4:00 pm

JUDGMENT OF RANDERSON J

The appellants’ application for review of the Registrar’s decision of 14 September 2015 declining to dispense with security for costs is granted. No security is required.
____________________________________________________________________

REASONS

Introduction

[1] On 12 June 2015 the appellants Mr and Mrs Kaye filed an appeal against a judgment of Peters J delivered on 14 May 2015.^[1] Security for costs on the appeal was set at $5,880 but on 25 June 2015, the appellants applied to have security dispensed with under r 35(6) of the Court of Appeal (Civil) Rules 2005 (the Rules). The respondents advised on 6 July 2015 that they would abide the Registrar’s decision. They have since confirmed they will abide the Court’s decision on this review.
[2] The Registrar considered that further information was required and wrote to Mr and Mrs Kaye on 16 July 2015 seeking further information including full details of their financial position. Mr and Mrs Kaye provided additional materials but, on 14 September 2015, the Registrar dismissed the application to dispense with security for costs.
[3] On 25 September 2015, Mr and Mrs Kaye applied to review the Registrar’s decision. I have considered the application under r 7(2) of the Rules and s 61A(3) of the Judicature Act 1908.

Background facts

[4] The respondents are a firm of solicitors in Hamilton. They were asked to represent Mr and Mrs Kaye after their previous solicitors had allegedly acted negligently over the purchase by the Kayes and their company of a business and associated land. The respondents’ instructions included attending to settlement of the transactions and issuing proceedings against the Kayes’ previous solicitors for negligence.
[5] The respondents later brought proceedings against Mr and Mrs Kaye for legal fees, but when confronted with a counter-claim by Mr and Mrs Kaye alleging professional negligence, the respondents abandoned their claim. The trial before Peters J was therefore confined to the counter-claim brought by Mr and Mrs Kaye. Losses in excess of $2.5 million were claimed.
[6] Peters J found that the respondents were in breach of their duty to the Kayes. In particular:

• (a) They had received instructions from Mr and Mrs Kaye to pursue the negligence claim against the previous solicitors in May 2007 but did not file proceedings until March 2008.
• (b) They failed to give adequate advice to Mr and Mrs Kaye and their company about the damages they might expect to recover as well as failing to advise that any such sum might be reduced due to the Kayes’ contributory negligence.

[7] Despite finding that the respondents had breached their duty of care to Mr and Mrs Kaye and their company, Peters J found that any such negligence was not causative of any loss to Mr and Mrs Kaye. The Judge’s conclusion on the causation issue followed from her rejection of evidence given by Mr Kaye that, but for the inadequate advice of the respondents, he and his wife and company would have accepted unconditional offers for the land and business they had earlier purchased.
[8] The Judge found that Mr and Mrs Kaye knew at the time they made the counter offers that they might recover only approximately $100,000 from the previous solicitors. Peters J also found that if Mr and Mrs Kaye and their company had accepted the offers, it was highly likely the prospective purchasers would have settled the transactions. Instead, the actions of Mr and Mrs Kaye in making counter offers had led to the purchasers losing interest in buying.

The Registrar’s decision declining to dispense with security for costs

[9] Applying the test established by the Supreme Court in Reekie v AttorneyGeneral,^[2] the Registrar’s essential findings were:

• (a) The information provided to her showed that Mr and Mrs Kaye were “financially stretched” but the information did not satisfy the Registrar they were impecunious.
• (b) While the appeal might not be hopeless, the merits of the case were not strong.
• (c) The Registrar considered that the counter-claim brought by Mr and Mrs Kaye was extremely unrealistic and did not accept that the benefits to be obtained by pursuing the appeal outweighed the costs of doing so.
• (d) Legal aid had been withdrawn in 2013 but the Registrar had not been given sufficient information to determine the reason for the withdrawal. She presumed that the merits of the case had been assessed by Legal Aid as being poor.
• (e) There were no exceptional circumstances or matters of public importance or significance that would justify dispensing with security for costs.
• (f) While the appeal could not be considered to be vexatious, the Registrar had “some concern for the validity of the proceedings”.
• (g) In the circumstances, the Registrar did not consider it right to require the respondents to defend the appeal without the usual protection of security for costs.

Analysis

[10] I have reviewed all the relevant materials and have reached a different view from the Registrar. There are two significant features I consider to be particularly material. First, the High Court Judge found there had been a breach of duty by the respondents but found against Mr and Mrs Kaye on causation grounds. Issues of causation are notoriously difficult to assess and are highly fact-dependent. The Judge’s reasoning on this important issue is very brief. On appeal the Court will be required to consider all the relevant evidence carefully in determining the appeal. It cannot be said that the appeal is without merit in the absence of a full examination of the evidence. While the amount of the counterclaim by Mr and Mrs Kaye may be inflated, possibly substantially, it cannot be said at this stage that the costs of pursuing the claim are likely to be outweighed by the benefits.
[11] Secondly, a review of all the material on the file, including that which relates to the earlier successful application by Mr and Mrs Kaye for dispensation from the payment of filing fees, shows they have few resources available to meet security for costs. Mr Kaye is in receipt of national superannuation and Mrs Kaye is employed by a local authority. The bank statements each of them has produced and the details of their outgoings show that they are only just making ends meet. There is no evidence that they have any assets of significance which could be realised or borrowed against in order to pay the amount of security.
[12] In all the circumstances, I am satisfied that it is appropriate that security for costs be dispensed with.

Result

[13] The application by the appellants for review of the Registrar’s decision of 14 September 2015 declining to dispense with security for costs is granted. No security is required.
[14] I note that an extension of time under r 43(3) of the Rules was granted by Harrison J on 28 September 2015. The application for a hearing date can now progress. The Registrar is requested to deal with this as soon as convenient.
[15] As Mr and Mrs Kaye are self-represented, it would be helpful if the Registrar could, in due course after a hearing date is fixed, arrange for a telephone conference for case management purposes including timetable directions.

Solicitors:
Kennedys, Auckland for Respondents

---

^[1] Norris Ward McKinnon v Kaye [2015] NZHC 1025.

^[2] Reekie v AttorneyGeneral [2014] NZSC 63, [2014] NZLR 63.